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This paper addresses the issues of service composition with characteristic of transaction. In spite of the growing interest in service composition, current technologies are found lacking of an underlying conceptual model supporting transaction. A service theory model with characteristic of transaction based on finite state machine (tFSM) is presented. On the basis of the theory model, a formal model of transaction service composition ground on finite state machine is proposed. Furthermore, the implementation of automatic composition according to the service composition model is given in the paper.